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Published
Dec 9, 2022
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Marketplace: the key to success at Tech for Retail

Published
Dec 9, 2022

Amazon and Alibaba are the leading generalist online marketplaces, while Farfetch has made a name for itself in the world of high-end fashion and luxury. In each market segment, marketplaces offering hundreds or even thousands of retailers on a single site have sprung up in recent years.


Emmanuel Grenier, head of Cdiscount - Tech for Retail


Across e-tailers and traditional retail players the marketplace model is catching on. So much so that the conferences held on the second day of the Parisian Tech for Retail trade show, all revolved around this popular business model. The trade show took place on Monday and Tuesday at the Porte de Versailles exhibition center.

The marketplace model has become so important in the world of e-commerce that for Emmanuel Grenier, head of Cdiscount, it is "as important as the Champagne fairs a thousand years ago or the development of shopping malls in the United States in the 50s." The concept contributes majorly to turnover, which in France reached 129 billion euros in 2021.

The French executive urged the audience in the exhibition's packed conference room: "You have to go there. The customers are there and that's where the growth is. Some studies suggest that 75% of e-commerce will be done via marketplaces in 2025, because it meets the fundamentals of distribution. Customers expect an infinite offer, at the best price, by creating competition between sellers, and allowing customers to place orders and get them delivered anywhere."

An analysis shared by François Cousi of PMP Conseil. "Today in France, eight of the ten most important e-tailers in terms of sales have marketplaces", he specifies, while analyzing that the business model adapts to all types of products but also services.

"The marketplace brings a deeper price range and more choice, and therefore helps attract a wider traffic," analyzes Philippe de Chanville, co-director of Mano Mano the platform dedicated to tools. The idea is that customers can research the different offers available to them without leaving the site. The aim is to keep them there until check out. To succeed, we must bring a specialist approach. We spend time and resources to create human content in store as well as tutorials so that they find themselves in a technical universe. We have to bring a speciality that creates an identity."

Cdiscount made the transition to a marketplace in 2012. "It was a fundamental strategic shift. But it took us ten years to do it. It took us a lot of time, mistakes and investments." Based on this experience, Grenier points out three key elements in the development of a marketplace.

"The marketplace is a subject of complexity and large numbers. First of all, it's complex because a seller is not a supplier and you will have ten times more sellers than suppliers. Second, a vendor has to be convinced that they are going to be able to differentiate themselves by coming to you. On average, they are in four to five places at once. And don't count on keeping your original sellers. We do 30% of our volume with new sellers every year. To attract them, you need to provide services. You delegate the stock and the price, you have to explain how to make sales. There is no longer a marketplace without marketing and logistics services. Second point, the customer stake. You are going to multiply your available products by 100 or 1,000. It's up to you to determine what you want to put forward on a smartphone screen. And this is the third issue. You also have to invest in technology because, with millions of products, everything that was manual becomes automatic."


Round table on marketplaces - Tech for retail



In recent years, many intermediaries have positioned themselves to support retail players in developing their marketplaces, which has largely driven down technology costs... while also increasing competition.

Adopting a marketplace model is what helped to revive La Redoute. Philippe Berlan, general manager of the historical player in distance selling is convinced by the model, but still has a few reservations: "The marketplace brings a lot of levers. But we have to identify which ones to activate and what for. In ten years, we have always opted to work selectively with only 800 sellers, where some have several tens of thousands. Finally, technology is not the biggest issue. You have divergent models between the vertical and the specialized. A luxury brand doesn't need to attract traffic, so what's the point of going to a marketplace? Most retailers do. But you have to think about how to make the duality between your own retail and your marketplace work. If you don't analyze that, it can very quickly become complicated with the teams. Furthermore, you need buyers for the retail business and sales people to support the marketplace sellers. These are not the same skills."

This discrepancy between marketplace competition and own-brand activity is one of the main issues between sellers and operators.

"The monthly cost is not an issue. The concern is that, for an SME like us, it's a very substantial investment in time and adaptation. You have to find the volume, because the margins are very low, and therefore offer the most relevant products," according to Cedric Sanchez, general manager of Provence Outillage, which sells its products on several marketplaces, from the generalist like Amazon to the specialized like Mano Mano. "And where it's problematic is when algorithms behave unfairly in search results. We find ourselves surpassed by the own brand despite our investments. Marketplaces have to find a balance between own brand and sellers. The competition needs to be healthy."

With growth rates announced at more than 20% for the next few years, and the whole e-commerce sector accelerating, the marketplace model should attract more historical retailers, following the example of Decathlon which set up its own marketplace last year. But the candidates will have to carefully analyze the balance between their own brand and their sellers in this business model. And, while the issues of performance recognition are not yet resolved, from e-commerce performance to retail performance, managing the addition of this activity is a new challenge for human resources.

 

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